Individual Retirement Accounts (IRAs)
No one wants to work forever. But you still need to have some way to pay the bills. An IRA from Co-op FCU is a smart way to plan ahead so when you're ready to retire, you have the savings to do it.
Set aside funds now and earn dividends on your money. We offer traditional and Roth IRAs with their own unique benefits and tax advantages. Consult our knowledgeable staff to see which is right for you.
- Summary
- Save for retirement
- Earn dividends on balances over $100
- Supplement pension or Social Security benefits
- No setup or service fee
- Traditional, Roth, and SEP options available
- Tax deductible or tax deferred plans
- Earnings paid monthly
- $100 minimum deposit to open
- Traditional IRA
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A traditional IRA lets you accumulate savings with tax deferred compounding of interest, and in most cases with tax-deductible contributions
The Basics
- No income limits to open
- Contributions are tax deductible on state and federal income tax*
- Earnings are tax deferred until withdrawal (when usually in lower tax bracket)
- Withdrawals can begin at age 59½
- Early withdrawals subject to penalty**
- Mandatory withdrawals at age 70½
*Consult with a tax advisor
**Certain exceptions apply, such as healthcare, purchasing first home, etc.
Am I eligible to open an IRA?
Nearly everyone qualifies for an Individual Retirement Account. There is no minimum or maximum age for opening an IRA—you can open one at age 8, 38 or 68.
Guidelines for making IRA contributions
The first guideline concerns your age. There is no minimum age for contributing to an IRA, and you can continue to make regular contributions until the year you reach age 70½. (Rollover or direct transfers of IRA funds from one IRA to another and from a qualified retirement plan to an IRA, and contributions to a Simplified Employee Pension plan can be made at any age).
You also must have received compensation. Compensation includes wages, salaries, tips, bonuses, and other amounts received for services rendered. Alimony is also considered compensation. You can make regular IRA contributions any year that you are younger than age 70½ and you (or your spouse with whom you file a joint tax return) received compensation during the year.
How much can I contribute?
The amount qualified IRA owners are permitted to tax year 2011 is $5,000. Additionally, catch-up contributions can be made by qualified individuals over 50.
Spousal IRA rules enable married couples filing jointly to contribute the maximum amount to their separate IRA accounts even if the one spouse has little or no earned income. To qualify, their combined income must be equal to or greater than the total contributed amount.
When can I contribute to an IRA?
An IRA is flexible. You decide how and when to make contributions. You also have flexibility in designating your contribution to the current year. Contributions for the preceding year can be made until April 15 (the deadline for filing federal income tax).
- Roth IRA
The money you contribute to a Roth IRA has already been taxed. So the principal amount is never subject to taxes or penalties in the future, as long as you stay within the contribution guidelines. This retirement plan allows the money you contribute to grow tax deferred. If you do not withdraw any of the earnings until you have had the plan for at least five years, and satisfy on of the qualified events, those tax-deferred earnings becomes tax free.
The Basics
- Adjusted gross income must be less than $122,000 to contribute ($179,000 for joint filers)
- Contributions are NOT tax deductible
- Earnings are 100% tax free at withdrawal
- Principal contributions can be withdrawn without penalty*
- Withdrawals on interest can begin at age 59½
- Early withdrawals on interest subject to penalty**
- No mandatory distribution age
*Subject to some minimal conditions.
**Certain exceptions apply, such as healthcare, purchasing first home, etc.
Who is eligible?
Unlike the traditional IRA, there is no 70&frac; age limit on making contributions. You simply need to have earned income equal to the amount you contribute. (There are income thresholds, which may reduce the amount you can contribute).
How much can I contribute?
Individuals may contribute up to $5,000 under age 50 and $6,000 over age 50 per year if their adjusted gross income (AGI) is less than $122,000. Married couples filing jointly may contribute up to $5,000 each if their AGI is less than $179,000.
When can I use my Roth IRA assets?
If you satisfy two conditions, you may make tax-free and penalty-free withdrawals from your Roth IRA. First, the plan must have been open for a minimum of five years. Second, the withdrawal must be made after the occurrence of one of the following events:
- Age 59&frac;
- Death
- Disability
- First home purchase
Can I move money from my traditional IRA to my Roth IRA?
The answer is "Yes." There are specific rules that govern the process of rolling over funds from traditional to Roth IRA.
Am I required to take funds from my Roth IRA?
Unlike the traditional IRA, there are no required minimum distributions at age 70½. Your earnings can continue to grow until you need them. There are special requirements when these plans pass to your beneficiaries.
For more information on any of these IRA plans please ask one of our representatives for details.
